Crain's Chicago Business Manufacturing Breakfast

-This should become a regular form for asking the talented and the experienced leaders from a broad range of local firms to share their thoughts on high-performance growth strategies not only for the coming year but for the years ahead. I like to thank of manufacturing as the soul of Chicago. It's what initially put our city on the business map and lead the foundation for the diverse regional economy we have today. Crain's has been covering your industry for more than 30 years, watching and reporting as the manufacturing sector has evolved. We view this as an unprecedented time of opportunity for manufacturers as they seize new markets, new technologies and a new public awareness of the importance of manufacturing to the nation's economy. Now, we're not the only people excited about the future manufacturing Chicago. This morning, we are joined by a group of outstanding sponsors who have a laser focus on meeting the needs of manufacturing companies. We're honored to be joined by representatives from our three co-sponsors MB Financial Bank, Prescient Solutions, and Sheppard Moscow, as well as our presenting sponsor Grant Thorton. I'd like to take a moment to introduce representatives from these organizations and give you a chance to thank them. When I say their names, please stand so everyone can see you. From our co-sponsor MB Financial, we have Ed Milefchik, who is the Executive Vice-President of Commercial Banking, and the Director of the bank. Ed, please stand. From more than 100 years, MB Financial has been providing financial solutions based on the relationships it has with Chicago manufacturers and the middle market business community. In addition to the banks, wide range of commercial and personal banking products and services, it has a wealth management division that offers trust, private banking and investments. This combination has helped MB Financial reached more than $10 billion in assets. Ed has 27 years of experience and as he explains, MB Financial success comes from the philosophy that we treat our customers better by delivering a high level of personalize service. From Prescient Solutions please welcome Jerry Irvine, who is Chief Information Officer and Executive Vice-President of Sales. Jerry? Prescient Solutions is one of the premiere information technology outsourcing companies in the Chicago area. Jerry and his team are not your average computer geeks. They become an extension of their client's business and help to maneuver those companies to the IT landscape. Prescient offers specialized products that do more than create stable and secure IT environments. Their work also leads to greater productivity and reliability while decreasing-- by decreasing total cost of ownership. As a quick side note, Jerry serves on the National Cyber Technology Task Force, which advices Federal decision-makers on cyber technology policy. From our third co-sponsors Sheppard Moscow, we're pleased to have Johnny Kelleher, who is our partner. From its start in 1970, Sheppard Moscow has grown into a global firm that focuses on organization development consulting. It specializes in developing leaders who can deliver results in complex businesses. The company takes two approaches to this; it consults with leaders to help them response to the real issues underlying their business challenges, and then it designs and delivers experiential leadership programs that create learning experiences to help them become global leaders. While Johnny leads the operation in Chicago, Sheppard Moscow also has partners in Dublin and London. Its clients expand the globe and include household names such as All State, Ford Motor Company, Kellogg and Stryker. Please again-- Johnny, thank you for being with us. Now it's my pleasure to call to the podium Jim Maurer from our presenting sponsor Grant Thorton. Jim is an auto-partner as well as Chicago office practice leader for consumer and industrial products. Grant Thorton, which has its headquarters here, is one of the world's leading organizations of independently owned and managed accounting and consulting firms. These firms offer insurance, tax and specialized business advice to privately help businesses and public companies. It's more than 2,600 partners provide clients with distinctive, high-quality service in over 100 companies. Jim has spent the last 25 years working with entrepreneurial, high- growth companies and manufacturing, distribution and retail. While he currently heads the Chicago offices' consumer and industrial products practice, Jim recently completed the five-year stint as the National Managing Partner in this area. In addition to providing audit services to his clients, Jim has advised companies on general business issues including mergers and acquisitions, strategic planning and process improvement. And he continues to be the lead facilitator for clients who are doing strategic planning. Please welcome me in joining Jim Maurer to the podium. -Thanks David. As David mentioned, it's year three and it's been a great three years. David, first, I wanna thank your team. It has been-- this is the premier event in Chicago for manufacturing. And just take a quick look around the room. This room is full and I think we turn people away. So congratulations to your team and thank you all for coming. I've been standing up here three years in front of probably a lot of the same people. And-- last year we talked about growth. The interesting thing I gave you a little insight as to what we were seeing in our clients' boardrooms. And everybody last year had on their agenda, we are going to double in size. Now it might have been three years, it might have been five years, but we're gonna double in size. While those boardrooms this year, and we're still talking about growth, but we're talking about it just a little bit differently. We're gonna make sure it's pretty profitable. Profitable growth is where everybody-- is where we're spending time. It's been the main topic. There's a lot of uncertainty out there. We were just talking about it at our table. We've got the fiscal cliff right in front of us. You've got China slowed down. The interesting thing in China we've got some slow down but you've got some ramping up in some segments and some companies trying to do it at the same time. You've also got the European crisis. We've got an automotive slow down. They've been running pretty good and still got backlog. But what's happening is the suppliers are starting to see the backlogs often. So this is gonna be very challenging 2013. I think we're all hearing just a little bit of caution. We're all hearing pulling back a little bit on the capital spent. Well, in that situation, I wanted to share with you today probably the best piece of business advice I have ever gone. You're gonna have to take notes. So you do have-- I'm not kidding, 'cause if you don't take notes and when you're gonna be so impressed. When you're done, you're gonna turn to the person next to you and say, "Can I copy that?" You've got a purple book in front of you happens to be a Grant Thorton book, pull that out-- I'm really. I do-- I wanna see you reach out and get that book. You gonna wanna write this down. Here we go. The best piece of advice I got I still use today is manage your R, and that's the letter R. Manage your R. Not you're not gonna understand this if you don't write this down. Now, I want you to write this equation down. E+ R=O. Here's the important part. Event + Response = Outcome. Manage your R. How well you manage your R determines how successful you will be. Think about the E, the Events, one of the things I just listed. The fiscal cliff, China slowdown-- these are big ease. Now to use this equation and to manage your R well, there are four rules. Rules are important. First rule, always press pause before the R and after the E. So right before you're gonna respond press pause, really make sure you understand the events before you respond. The second rule, the most important, Rs are related to the most difficult ease. Right-- right now-- to summarize that, big Es take big Rs. Who has got a big Es sitting back at the office right now? You shouldn't even be here at breakfast because it's so bad. I do. That's a big R. You've got to really spend time on that response because it is going to determine how successful you are. Here's rule number three, do not blame the E if the R is not working, right? How many times do we do that? Our response didn't work, guess what? Change the R. Last one, rule number four, do not let the pace of change of the E be faster than the pace with the change of your R. We can all think there's some brand names, some recent companies that had great market share and now have none or on the verge. The E outpace their R. That series of rules, that piece of advice is how we run our business at Grant Thorton. Our business is tied to your business. My challenge to you is to manage your R over the next year. My friend who gave me this piece of advice individual by the name of Tim Kight, he runs a group called Focus 3. We've been working together for 10 plus years. He's a good consultant and a great friend. We both see companies that are doing extremely well in responding to this-- their Rs with these Es in front of them and what are they doing. And this is we'll wrap it up. They got three things that they are doing. They are investing in process-- new process-- innovation in new process and new product. They are investing in new market identification, no market penetration. It's formal processes inside their companies. They've got leadership, new market penetration, and then finally they're spending money on getting better information. I think we've got a great panel today. They're gonna talk about some big Rs, I'm sure, 'cause they're all facing the same big Es that's we all are. So David, again, thank you very much. I'm gonna turn it right back to you. -Before we start our panel, there's just a handful of other guests I'd like to acknowledge before we start. First, the man who is responsible for the great journalism, Crain's does everyday online and every weekend print, Crain's editor Michael Arndt. And we're honored to be joined today by leaders from several association and advocate groups, who everyday champion the cause of manufacturing in Chicago and Illinois. All these executives have been valued partners as we plan today's event. So please join me in welcoming them. Brian McGuire, President of the TMA. Pam McDonough, who is President and CEO of Norbic and the Alliance for Illinois Manufacturing. Bruce Braker, Director of the Chicago Manufacturing Renaissance Council. Mike Holzer, Director of Economic Development for the LEED Council. And Julie Starsiak, Director of the Illinois Manufacturing Association. Thank you all for all your help in making today's event possible. Now, I'm honored to introduce our moderator, one of Chicago's very own, Dr. Don McNeeley is an industrialist, professor, and economist. His opinions are widely quoted in the trade press, the Wall Street Journal and yes, Crain's. He is most proud of the fact that he grew up on Chicago's west side in a large working class family. Don is president and CEO of Chicago Tube and Iron company and he's also adjunct professor in Northwestern Universities, McCormick School of Engineering. Chicago Tube and Iron is a steel distribution and fabrication company headquartered in Chicago. The company recently completed its 98th consecutive profitable year, which is a record in the U.S. steel industry. In 2001, Don was the principal architect of a merger with his company with the Olympic Steel. The combined companies have $1.5 billion in sales, 30 plants and 2000 employees, 350 of which were in Chicago. Don is a graduate of the Harvard Business School. He also attended the University of Wisconsin, Benedictine University and George Williams College. That means he hold the Bachelor's Degree in business, a Master's Degree in Business Administration and another in Management and Organizational Behavior, and a Doctorate in Economics. So without further delay, I hand things over to Don McNeeley, who will lead the discussion with our panel of leading manufacturing executives. -Thank you. -As I walk this morning, it was somewhat different. I tried to discern what was different about this morning and I was going to spend a couple of hours with kindred spirits. How often are you in an environment with people that get what you do each and every day? We live in a society, and this morning I will set aside political correctness. But let us divide society into the makers and the takers. How often is it that you were in an environment of makers? We live a legacy for the next generation. The Bible says, "Give a man a fish he'll eat for a day. Teach him to fish he'll eat for a lifetime." Is there any better legacy to lead the next generation than the means of employment, a manufacturing job? When you get to the end of your life, there's only one question that you will measure your life by what's your existence relevant? Is society better because you were here? What I find in our research studies, by enlarge, if you're in manufacturing, that answer is almost an assured affirmative. But today in that political correctness aside, there's an elephant in the corner of that room and we're gonna shove them right to the middle, that elephant right to the middle in the [unk]. In all due respect, as comforted as I am being in this audience, you're the wrong audience, you get it. Today, we are preaching to the quarter. We need to clean the room, clear the room out. And we need to fill it with journalists and we need to fill it with the media and we need to fill it with the policy makers that do not get it. They do not have the ability to connect that dots of what we do. We all have trade publications and they do a good job, the system, they're advertising. But where is our voice outside of our trade publications? I traveled the world and I must tell you, Crain's, that magazine, that company is one of the few voices of manufacturer. And David and Amy, before we go further, we should acknowledge you for a job well done. Thank you for being our voice. In 19 months, my colleagues and I will celebrate our centennial, a feat that 99 out of every 100 business launches never achieved, only one out of every hundred business launches can celebrate its centennial. Isn't that interesting? But there's an interesting phenomena of those that reached that centennial, manufacturing companies are disproportionately represented. So if you take one out of a hundred in a sign that a value of X, you know, you have professor behind the podium. The representation of manufacturing in the Centerians is 6.5 x X. Why is that? We're not a glamorous industry. It's difficult to recruit to. You don't feature that celebrity industrialist on a TV show. We're boring. We're vanilla. Nobody flocks to accept the crown at the cocktail party, yet when you're looking for financial sustainability, the ability to contribute to a society and create jobs isn't it interesting that we all go to the boring manufacturing center. So we are over presented when you look at who those are that we should worship, who can sustain a success. You know, we live in the best country in the entire world and for this room we're fortunate, we're blessed whether you are born here or your migration brought you here. It is indeed the best country. A lot of economists wanna throw data point after data point and I have only one this morning if you all bear with me. From the time Crain's started to promote this event to today, the world population hit 7 billion people that's happening in the last few weeks. We declared our independence from Great Britain in 1776, 206 years ago. In America we have just over 300 million in our population. If I take that 300 million as the numerator and divide it by the denominator of the 7 billion, it's 0.04. So now let us connect those dots. With just four percent of the world's population in just 236 years of age, we are able to produce 25 percent of the world's output than we have 30 percent of the world's net worth. Whenever there's a volcano or tsunami or some natural disaster, who's the first country that are writing the check, we are, and in the world of public arena, it's never big enough, is it? But we were born in this great country. Now why were we able to achieve those impressive numbers? Because in America what made us great was the middle class. This resulted in a distribution of wealth, a standard of living and our nation went up beyond any others. The middle class was able to do this because why? Where was the middle class employed and deployed in hyping manufacturing jobs. You cannot increase the standard of living of a nation without a middle class. You can't have a middle class without manufacturing or industrial jobs. The manufacturing platform of a nation needs to increase wealth, elevated standard of living, home ownership, improve healthcare, a longer life. Look at the mortality tables. Yes, manufacturing has contributed to that. If I move for a moment to the government and it would be very easy to get on a soap box whatever you redundant to what you've said from behind here at podiums. But what is the first responsibility of a government? If we step back and pretend we're over bearing simply connect the dots, the government needs to protect its citizens especially in this day and age. How do you protect your boarders without a military? How do you have a military without an arsenal? How do you have an arsenal without weapons? And how do you have weapons without a manufacturing sector. Are you going to offshore the manufacture of your weapons to your potential enemies? How might they be? They might be everybody in the world right now. So we're not connecting the dots at the policy level as well. In terms of economic viability, each manufacturing job has a ripple effect, you've all heard that. One manufacturing job creates 3-3 1/2 service sector jobs. Look where your plant is and I'll call the waitresses, in the auto mechanics, in the bankers, in the bakery. Those all exists because of manufacturing job. We talked a bunch of society going from an industrial-based were dead to a service sector. But what is ignored there is the mutual dependency. When you look at who's buying the services, who's doing the banking, who's hiring the consultants, who's buying the software at the end of the channel of distribution, somebody is making something. There has to be a manufacturing sector. Yeah the media would prefer to future our failures as supposed to our successes. Our plant closing as supposed to our plant openings and our labor strikes as opposed to our labor occurs. At Northwestern, I have the good fortune of teaching in their prestigious MEM program in the Engineering School. Ten years ago, I had asked the undergraduate students coming in to the graduate program. What do you hearing at the graduate-- the undergraduate level about manufacturing. "We're hearing it's dead. Don't pursue a career, the Midwestern is the Roosevelt professor, the last person to leave manufacturing please turn off the lights." That's the impression that undergrads were entering grad school concerning our industry. Here's the sobering point, that was ten years ago. Five years ago when I was posing the same questions, there was an epic shift and the answers were, "Manufacturing? What? We're hearing nothing." You see, there is an emotion worst than hate. When you hate something and you fight with somebody, something down there is worth fighting for. The emotion that's worse than hate is apathy when you hear nothing. Isn't that a shame? Now, if you connect it with my earlier criticism of much of the media, Crain's accept it. You now understand the impression they get. What about the laws of supply and demand? If you see that the market has the demand for green widgets and you go back to low and produce blue widgets you go out of business. We need math and science skills. But the score system continues to produce a product for which there is no market for. Why? They have a monopoly. If you live within this zip code, you have a monopoly on education unless the consumer can pay for private education, which is increasingly expensive. Undergraduate degree, Northwestern University, quarter of a million, let me round it for you. And by the way, talk about a captive monopolistic market. If your customer doesn't show up that morning and they happen to be under the age of 16. The police are gonna go get them and deliver them to your factory, your class room. Now, I don't know about you but that does not describe my business. The interesting thing is we find that students today are choosing their major by the least amount of math. They're choosing their course by the least amount of reading. They're looking for courses that have 30 pages reading or less. A class is 10 weeks long, 30 pages of readings, 3 pages a week. My goodness, look at the tripping points. So let me connect that for you. America this year will graduate 60,000 engineers. I'm on in engineering faculty. China will graduate 600,000, India will graduate 600,000. We will graduate 60,000 engineers to China and India is 1.2 million, 1.2 million. So as we pursue that process, we don't let them stay here, we send them back to compete against us. So as I close this morning and get to our panelists who we want to hear from them. I will tell you there's a shift in our country that once made us great. And I know I'll be around to protect my daughters and be there for the council, but with solving this mathematically, I won't be here for their grandchildren. So how do you protect them? Through a trust fund? That's a prescription for disaster. But the beauty is, we don't have to go this alone. We have people that have had a successful track record that are willing to share it with you. And today we have four great panelists who are experts in manufacturing. They're familiar with the industrial landscape and they're very generously agreed to share those insights today. To my left, then you have a full biography in the package in front of you is Tim Jahnke. He is the President and CEO of Elkay Companies. They are a manufacturer of premium plumbing and cabinetry products for residential and commercial application. Prior to Elkay, Tim spent 21 years in leadership roles at Newell Rubbermaid. Ladies and gentlemen, Tim. To Tim's left is Steve Kersten, owner and President of third-generation WaterSaver Faucet Company and Guardian Equipment, world-wide manufacturer of faucets, valves and related products. He's been based in Chicago for over six decades a long way in to his journey to his centennial. Ladies and gentlemen, Steve Kersten. To Steve's left we're fortunate to have Bruce Liimatainen, Chairman and CEO of Finkl & Sons, formerly with U.S. Steel Corporation Lockport Steel Fabricators. Bruce holds four U.S. patents in the treatment of molten steel and other operations. Bruce. -In his left, our anchor is Linda McGill-Boasmond, solo owner and President of Cedar Concepts Corporation. They are processor of raw materials for Colgate, Citgo, P&G, Boeing and other fortune 50 companies. She holds technical and leadership positions as well as operation manager and partner. She's the first and only Afro-American woman on chemical manufacturing plant. Ladies and gentlemen, Linda Boasmond. I like to start this morning with one of the mold questions on our survey. What is Chicago and Illinois reception to the manufacturing sector and how does it compare to what it was three or five years ago? Do you feel we are valued, appreciated, supported? Do they really get our value? Linda, would you like to start this out? -Thank you, and thank you for having me this morning. I actually like to go back a few years before the three or five years when we look at manufacturing we go out back about 10 to 15 years, where we are clearly undervalued. It was not where we're [unk] our children for jobs. The political climate around manufacturing was not really being focused on. And if we look at what happened 2008-2009 clearly that changed. We saw the erosion at the middle class because we didn't have manufacturing. I find one of your statements earlier when you talked about India because I actually ended up with my company by-- starting up, I need to tell you a little bit about this story working for a young lady from India. And she made a comment to me and it never went out of my mind. She said, "You know, your people don't make anything." And that just really stood with me and as I progressed to college and had an opportunity to enter into the manufacturing realm, I just thought, you know, I wanna make something. If-- as we go back to the question and whether or not Chicago welcomes this climate, clearly it does now. I had the opportunity to participate on a session with Chancellor Wayne and dealing a lot with the City Colleges initiative to try to bring manufacturing ideas back to the City Colleges. I know particularly, I participated with the Olive Harvey initiative that will be dealing with logistics. I know they're gonna role out manufacturing at Daley College. So I think the city gets it. You look at what just happened in Crain's article when Mayor Emanuel is talking about looking at the port. But then the port in the City of Chicago, they just ran that article. You know, how can we make this a valuable tool for our city? We talk about jobs. I'm sure like the other panelists that are here. The city of Chicago and other places have really taken a point to recognize manufacturing as to be the ground base for building the back of the middle class in the city of Chicago. They've got a lot of initiatives out there for company our size for example. They mentioned Pam McDonough here from the Alliance for Illinois Manufacturers. We tap into those types of resources. The city in the state they offer a lot of initiatives to allow us to assist in training grants. We're very proud to say that just the last month, the city of Chicago has actually passed the-- I'm not exactly sure with the word for it but we will be building a lead chemical manufacturing facility on the south side of Chicago. So the city gets it. I think the state is getting it and it's just becoming upon us to work with them and try to find innovative ways to make this work. -Bruce, you have been in the Chicago area a long time. Your comments? -Yeah. The question was the last three to five years compare to the past and really commend you of course with your comments in the next generation. That's what we're trying to do at Finkl. We've been in Chicago now over 130 years believe it or not. A hundred years at our site on the North side and a misconception-- and Crain's does get it by the way. They do get that manufacturing is good and we wanna applaud that. You know, working with the city, we've had a phenomenal run on the North side of plan manufacturing district. It's been a success to us and now we're looking for the next step and we're doing that. The city and the state do get it in this last three to five years. We're building, we're not moving. We're building right now as we said here a brand new steel plant, brand new. All of the hot metal, the melt shop, the forge shop, the heat treat, 100 percent is brand new, designed and engineered and put in by people, our employees and people in Chicago. So it's not just the working people that our employees will be moving. It's gonna building the equipment. It's just a world-class story. I'm an engineer by training. So that build out is taking place and we're building that plant for another hundred-year run. We've been on our 100 years, this is our 100 years. And the new plant for the city, and really, really is exciting. It will be the class of the world not world-class in a recycling forging industry, class of the world. Anybody-- talked to folks here today are welcome to come and see it. We could not and would not have done that to the question without city, past city and present city and state of officials. We looked at all over. We looked at Ohio. We looked at Canada. We looked at, you know, here, fortunately through the city and the state we found a property that's been rejuvenated as a property. There were 1,200 employees at first and went bankrupt then it was closed. The buildings, the cranes, we're able to use them finding that through the city and state and stepping up just in the last few years with the crash that took place. We've never gotten any support. We've gotten tremendous support from both the city and state. And we will have by the end of 2013, a class of the world. It is just-- so we couldn't say enough and if it weren't for that when the crash came, we found a place to move in to Canada. We would have move to go back near our company we own in Canada. So, you know, I think, not only do I think they get it but then we go to the education and their jobs in the past two years we've hired over 100 people or from 300 up to over 400 people today. We've got kids from virtually everyone at the colleges down there. We hired over 35 kids this summer in our plant help us in the build out. So it's the city and state get to answer the question and we're excited to be on another 100-year run. -Well, we actually hear some encouraging news from some of our policy makers. If you look at the Crain's print out that's on your table, I wanna move to this question I think that's in the mind of all of us. -You know, I missed one point, please. -Please go ahead. -In the beauty from the city standpoint and mentioned it, our new plant is on the south side of Chicago. It's at 93rd Stony Island. When I started at Finkl, the neighborhood was terrible. You couldn't walk across the street. Our employees would have a problem in the Clybourn Quarter it was unsafe. Now you have one of the best areas in the city of Chicago, the north side Lincoln Park. Our new plant in this area with 30 percent employment, it needs a lot jobs, jobs, jobs and what was mentioned the ripple down. We're using vendors in the community. Everything we can buy, we're buying in the community. We're using everything from buying local supplies to the janitorial, to the food. Finkl will have the manufacturing that ripple down effect. That's the point. When you look at this new PMD manufacturing in the south side, I may not be here but everybody will see the long-term advent and upgraded that community. -So in an academic environment we say there's your case study, there's the empirical evidence to that ripple effect we spoke of earlier. But as they talk in the back of mind, they're gonna--where are they finding the talent? Where are they getting this people? Manufacturing with high performance strategies or growth initiatives are not so much encountering the typical barriers of desire o market opportunity or even capital formation but rather a shortage of talent and skills. How will the shortage of talent and skills affect your company and its plan going forward, Tim? -Well, they're impacting our business today. I would tell you two conversations that I've had within the last two weeks. We were discussing plans for 2013 and, you know, it's typical budget season for a lot of companies out there and we were running through some numbers yesterday in our meeting room and I was told, I was a little confused by some projections on in new channel that we had entered, a food service channel, where we were offering products that were more traditional to other parts of our business. And I was confused by the fact that we have been running at about 25 percent growth this past year and suddenly the growth projection for next year was zero that caught my attention as you can imagine. And, it was a very simple look from my CO, who looked at me and said, "Tim, we're at max capacity. That's the number we can produce." And I said, "Well, we're running one shift." He said, "Yes, we are." And that's what we can run right now because we can't find employees. These are not entry-level jobs. They are mid-level skill. I wouldn't say they are skilled labor. They're not tool and die, you know, mechanical type of jobs. But they are skilled welding jobs and there's-- the whole series of issues with that one. We're not training. We're not developing. We've eliminated virtually every partnership program that ever existed in the area. I think that's something that is a huge danger to manufacturing in Chicago. It's manufacturing the United States. So, it is an issue right now and it's impacting our business. It probably will cost us an opportunity to sell some more between $5 and $10 million worth of additional products that I have demand for that I can't produce. In addition to some other major type projects, we've had to basically factor out over a longer period of time from a lack of engineering. You mentioned the data on engineering graduates in United States, I've seen those numbers before and it's terrifying. Sixty-thousand engineers a year, numbers ten times greater in some other countries that are taking manufacturing jobs and other jobs that go with it to their countries and with that goes the wealth of country to other parts of the world. So I-- you know, that's the E part of this, right? So what's the response, the R part of this? Well, we have to do things internally. I think your partnership programs, training, development, working with schools, making sure that those who are graduating with those engineering degrees are being attracted into companies like ours and into environments like what we have. We've been challenged in growth initiatives over the course of the last few years where we're in a mode right now of growth. But it is one of the greatest limiting factors we have going into 2013 and beyond. It's not capital as you mentioned and it's not opportunity. It's having the proper people and the proper skilled labor that we need. -And as Tim taught us, it's not necessarily just engineering but basic mechanical aptitude and, you know, kids are working in a gas station growing up. They're not growing up in a farm anymore. But let me have a trivial question. Anybody remember the Washburne Trade School? You know, who has filled that void? Steve, does any of this resonate with you? -Absolutely. It's ironic that you mentioned the Washburne Trade School because when my father started our business with his father, he came out of service in 1946. He was a graduate of the University of Chicago. They had this idea to start a company manufacturing faucets so my father went to Washburne Trade School. And even he's a college educator, he learned to operate and laid in the drill press and he would go out and sell and if he got an order, he would come back to the factory and make the faucets. So obviously, we've come a long way since then as Don had mentioned, we're a 65-year-old third-generation company. But in many ways, we really are in microcosm of what all the manufacturers in this room or in the state or in this country must be facing. So, much of what I was gonna comment on is really been summarized in this article that was on everybody's seat. There are lots and lots of people out there looking for jobs. But there yet, there's lots and lots of jobs that are going on field. So there seems to be this tremendous mismatch of between the people who are looking for jobs and the people that all of us in this room need. Like Tim, our jobs in the spectrum, all we have people in our factory, who I would say are relatively, in relative low skill decisions such as assemblers, testers, packers-- we have sort of mid-skill level positions people who do polishing and buffing operations, how the coding operations which require a certain amount of expertise all the way up to skilled machinist. CNC setup and CNC programmers. So, we really-- you know, we have lots of different slots that we need to try and fill. At a minimum, everybody comes in the door must be able to read and understand work constructions. They must be able to read and understand safety rules and regulations. They must be able to understand our product line. They must be able to keep track of what they're doing. They have to use a computer to follow the workflow and input data and they have to be able to use measuring instruments. And those are not skills that the average person walking in the door is going to present with. So it's been a very challenging frustrating situation for us and we've had to resort to a lot of self help. First thing we did is like Bruce's company, we faced space constraints and space challenges. And we looked at all sorts of options for what we should do to address that from expanding in the city, moving out to the suburbs. We ultimately decided to stay exactly where we were and expand and renovate because I couldn't bear the thought of losing the people I already had. So, if you're challenging, you know, if you're struggling to get good people in the door, the last thing I wanted to do was run the risk of losing people that I've worked so hard to get. So we stayed in the city, like Bruce's experienced. We've found the city to be very supportive of our efforts. But then we had to start to figure out how to address this skill shortage that we were seeing. So we did sort of a few things we brought in ESL instructor, we had on-site ESL classes. We hired somebody to come in into onsite training for people working on our machine shop. But then we were approached a few years ago by the people who were organizing Austin Polytech Academy. So I'd like to comment for a minute about that. Austin Polytech is a school on the west side of Chicago that's been in existence for five years. The goal of the school is to train kids from the impoverish Austin neighborhood for careers in manufacturing. And that can really mean anything from a college prep curriculum leading to a career in engineering or in management or finance all the way down to shop floor positions. So they asked us to become a corporate partner with the school and I thought, "My God, if we don't help these people, who's going to?" So we did. We funded the establishment of their, what they called the manufacturing technology center, basically their machine shop. I gave them the money to do that on two conditions. Number one, it has to be called the WaterSaver Faucet Company Center, so that everybody will know and see our name. And number two, I get their best graduates. So we also provide plant tours and internships, summer jobs for their students. We were approached just last year because of budgetary problems in Chicago Public School system. The school funding for the school didn't cut back to the point where they couldn't hire a guidance counselor. So they asked us to fund a guidance counselor position for one year, which I felt was critically important. You can't take these kids, give them this education and then shove them out the door and say, "Figure out for yourself how to apply to college. Figure out where you're gonna get a good education. Navigate the financial aid process. Go out and find a job with a manufacturing company. Present yourself with the put-- you know, well-put together resume." It can't be done. So we had to step in and help with them. We tried to step in and help with that. But I would say, relying on us, relying on private industry to do what the school system should be doing is not a sustainable solution. The school system itself is gonna have to step up and do it. And I know that there are tremendous efforts being made to do that. Linda referenced the community colleges in Chicago, Daley College has been designated as the focal point for training for careers in manufacturing. I see Ray Prendergast sitting over there. He's doing Yeoman's work trying to develop the curriculum and the programs to train these kids. So I guess my message would be just get involved. I think the days of hanging of "help wanted" sign and expecting qualified people to walk in the door are really over and really gonna have-- everybody's gonna have to sort of help pitch in to solve the problem. -Amy and David had given me a list of questions that came from the audience. And this was the mode topic. So I wanna stick with it for a bit and Linda, reading about your background. I'd be surprised if you don't answer them putting in this area. -Well, clearly I do. We recently partnered with a young lady, her name is Jackie Lomax and we informed together with Jackie something called Girls for Science. As I looked at the panel, I see I'm the only female sitting up here. And when I look at my growing up, you know, parents will tell you all the time to become a-- actually that's what I was gonna do. I was gonna be a doctor. But I hate something called cell biology and genetics and I knew I was not going to be a doctor. So my Dad said, "Okay, well, you know, find something that you like." And I really like physics because, you know, you come into class, the professor would do this like wonderful experiment, it was exciting. And I also like chemistry. The chemistry professor for really, really-- they taught in a matter that made the chemistry real. So they wouldn't just put an equation or something to come on the board. They would take this and relate it to something real life. So, you know, we say rotating hydrogen ions and new cell-- microwaves. And so I thought we need to do something with these young people. We want to do it now. So we took girls from the ages between 10 and 18. And we actually bring them into the City Colleges with Girls for Science and we work with them one on one so after you might find myself or anybody else that I can take, any other females and we take males too, to actually sit down with these girls one on one and teach them about the other types of sciences. They get it for the doctors. They get it for the dentist. Medical field has done a wonderful job of that but when you leave the medical field, if you would walk into my community, you'd be hard pressed to find someone to give you 10 stem fills to work in and clearly there are many others that you can do there. So it raise an awareness to me that we need to get out there and work with these young ladies and the program started off with like maybe 20 and now we have over 300 girls going through the program. So I think just like you indicated as we as manufacturers have had to find ways to join up with community partnerships and try to grow and have this next generation of young women coming through that can feel some of these positions. -And-- see, I commend those opportunity-- gotta get over that emotional hurt or Steve what you're doing in effect is double taxation 'cause you're already paying taxes. The school district is not producing what you need so you doom at yourself and I think the cautionary message you give is, it's not sustainable. You're helping the [unk] but eventually somebody needs to pick up this better and take it forward. Building a big plant, talk to us. -Well, and that's again the ripple down effect into the community. We've worked with schools on the north side, you know, for employees. But we've already working, you know, in the build phase with the two closest grade schools are working. We have our employees going over there. Those grade schools, we're getting the kids to talk to them about manufacturing already, to go to the high schools, we already have a female from the community that graduated. We have scholarships now that we're funding at IIT to get kids out of the community to learn technical professions and she's doing phenomenal in her second year at the University. So it's a continued ripple as you mentioned how businesses need to get involved. And the other thing that I think that the city gets that for our new plant we've hired a Masters with Chemical at the Cornell. He's working on a new plant moved to the city of Chicago, living downtown just started. We hired individual from Quinnipiac Masters in Economics working at the new plant. And we've hired, we've brought in 30 kids from [unk] school of mine this summer. We've got three or four coming to work for us. So the other attraction to manufacturing locating around a major city like you can attract some of the best talent from this country to come to Chicago and Illinois. -That's great. And, you know, you look at petroleum engineering, the number one starting salary out of engineering school is 85,000. Never worked a day in your life one out of every two petroleum engineering grads will earn over 85,000. So we're looking for those basic math skills to start. I mean, just try this as a consumer. Ever going to a store and you billed 16.37 and you give him the 20 and they put 20 in so the register tells him how much change to give you. And even spits out the coins. Do this, wait next time when you're in there and your bill is 16.37, let them enter the amount tender and then say, "Oh, I have two pennies." So watch the panic set on his face. It happened to me each and every day. Tim, talk to me a bit about the world scene. Three years ago, there were two camps, those that offshore specifically the China, and those that shows never to offshore to stay American-centric. There's not a third-group emerging that are those previously offshore they're not reshoring. Speak to that. Is that a trend that will continue? -I think that there's some significant opportunities. Every industry varies in every circumstance is different. I will tell a brief story about something that's going on with Elkay that is allowing us to bring jobs back into the U.S. and products that were being made offshore back to the U.S. Back in March we filed an anti-dumping trade case against Chinese exporters stainless steel things being exported in the United States. So this was a pre-dramatic action. But as you could imagine over the course of the last five years, we produce products for the housing industry. Well, for those of you who may not have noticed, there's been a housing issue and in volumes that have been decreasing fairly significantly. Housing starts are, I mean had dropped to as little as about 1/5 of what they were just a few years prior. But during the same period of time imported stainless steel things from China coming into the U.S. had increased by almost 50 percent, which is somewhat ironic. The more ironic part is that they were being sold for less than the cost of piece of steel that's made into that. So we felt very comfortable that our activities were going to be approved and move forward with the SEC and International Trade Commission. So we took this action. It was fairly expensive for us. But we did it to protect jobs here in the U.S., protect our industry, protect our company, obviously our employees, and also the consumers in our customer base. You know, one of the amazing things I've found as we have gone through this process is that our customers responded very favorably to the fact that we were taking an action to do something about activities that were taking place offshore. So during the course of this process, we've been successful to date. There's still one final ruling that takes place this spring. We're comfortable that we will get a favorable ruling there but everything has been extremely favorable and it has allowed us to bring back manufacturing. One of the first steps we did take upon filing this is what we did produce some of our products for the U.S. market in our Chinese facility that was relatively small but we discontinue that and moved it back in, refigured if we're making these claims as we need to make sure that our own house is clean and we're, you know, took those steps. We believe that that will result in us producing about half a million more units of things this coming year 2013 than in the past. That means probably in the neighborhood of about 100-150 jobs and then we can be very comfortable in that estimate. So I think sitting back and just waiting, you know, again, if we go back to the conversation prior to us coming up here, you know, the event was our market was declining. Our competitor, I mean group of competitors in Asia were growing dramatically. They were being very aggressive and the force of that event caused us to take a fairly aggressive response or reaction to it but the strength of our response and the result that we're seeing is very positive for, again, our company, our employees, our market that we participate in and ultimately our consumers and customers. And Tim, I'm impressed. All of us walk in tomorrow morning and 80 percent of your business parked for four years and not withstanding that. -Uh-hmm. -You're not only survived, you continue to invest. You know, the elephant in the middle of the room just turned around and there's a big sign on the side of them, which is you second most popular question, the Illinois Workmen's Compensation Environment. And Pam, I know you wanna run up here and grab the microphone, you're an expert in this area. Steve, let me kick it to you. You've got some experience with this, I understand. -I do but if I could just address for one moment to the last question, and reshoring point if I could comment on that. -Please. -We haven't been impacted in the same way Tim's company has. But one of the things we've seen over the years is the decline of our supplier-base in the United States. The reshoring movement really presents a potential for tremendous benefits for people who supply our company. I have a cheering section over there, company that we buy screw machine parts turned out for me. They came in this morning and they handed me a prototype of first piece of a new product that we're making. It's actually for a line that we will be exporting. But having these guys here locally just can't be replaced. -And whole Workmen's Comp, first of all, Bruce makes sure it's made out of steel. -No, it's glass. -But come back to Workmen's Comp. Bruce-- -Don't wanna get-- not get to Workmen's Comp but I'd like to comment too 'cause this is just literally within the last few weeks, literally. We've had folks over from-- this is interesting, very interesting, from Japan, Sumitomo, one of the biggest trading companies in the world. We have an order that we will get and it's gonna be selling die steel to China for Japanese auto-makers. So, steel made in Chicago through a Japanese trading house, sold in China. We've had a whole contingent of Koreans here the GM is very big in Korea. We have a big relationship with GM and Ford. And we got a team going in a few weeks for next year's big buy at the front end in Korea. Steel made in our new plant and just this week, I was working on BOPs blowout preventers for the North Sea in the U.K. or making little piece. Now why is that important for the world? The U.S., our new plant can make this-- heat a steel in 42 minutes versus 5.5 hours. And it's something sitting in an Atari game running the computer not out on the floor. So, our new plant growth is gonna be in these overseas markets. That's really what I wanted to comment. And this is just like happening in these last few weeks but it's been ongoing. We got people all the time. -And if you're in this room and you're over 50, one day we woke up, we used to wake up at Chicago, go to work in Chicago and sell only in Chicago. It is indeed global. Workmen's Comp, Steve lead us all, please. -Okay, well I'm sure experience is no different than anybody who has a manufacturing company or people have to pick something up, do something to it and put it down some places else. So if companies-- people are working with their hands, their arms, their shoulders, lifting things. You're at risk. We don't do business in any manufacturing outside of Illinois so I don't have a good basis of comparison but everything I've read in the case of the situation here is much, much worse than it is in other states. And I can tell you from our experience. It's a complete free for all. I know there been some attempts made it reform but they really haven't, to my knowledge made a very significant impact on this system. When we looked down our list of cost that we can control, there's nothing I can do about the price of brass that's controlled by world-wide supply and demand. The price of energy, I can't do anything about it. I mean, we can conserve as best as we can. But Worker's Comp Cost are-- variable and unpredictable cost. Back injury can cost anywhere from $100,000-400,000. There's a huge incentive for the doctors who were treating people to treat an injuries, work-related injury because they get higher rates if it's a work-related injury then if it's not, if the law in Illinois is if an employee has a pre-existing condition, if the activity on the job contributes to it in even in a minute way we're 100 percent liable for the entire condition. The craziest thing is that, you know, we try and do our due diligence. We have our employees take pre-employment physicals after we extend the job offer to try and make sure that they're physically able to do the job that we're hiring them to do. They can lie. They can misrepresent their physician, their condition, their past history. And we have no recourse. We're going through this right now or somebody claims they were injured. This woman had been operated on a year ago for the same hand that she claims as now been injured. She lied about it on her form. We can terminate her but we're still liable for the injury and for the disability payments. So it's a really terrible situation that really needs to be addressed in Illinois if we're gonna stay competitive. -I'll just add one thing 'cause I can do a little bit of a comparison Illinois versus other states. We have manufacturing in nine different states here in the U.S. and I won't duplicate any of the things. There are horror stories that we can all talk about. Without question, Illinois Worker's Comp laws are the most adverse to maintaining manufacturing jobs of any of the nine states that we do business and it's by a factor of several. So it is, while there were improvements made over the last couple of years, it is still dramatically worst. And it will limit the number of manufacturing jobs and the growth of jobs here in Illinois if it's not addressed. -Down-- if you know Pam at the industrial commission we have the hall of miracles after they have the hearings that day, at night we take all the walkers in the crutches out that were discarded after the award was given. We have, you know, all the arbitrators, you know, Uncle Al, the working man's pal. But it's the third that we have to deal with. What I wanna do is make sure that our manufacturing audience members do leave with some tape aways and I think one of the questions that we all have is here you are in the middle of this or at the end of this protracted recession we hope and you're still not only surviving but actually a very vibrant manufacturing environment. What strategic growth strategies of work for you through this tough economic manufacturing environment and how do you determine what opportunity as you guys are gonna focus on going forward? Tim, let me run this one from our left to right. -Sure. Sometimes the simplest things work. You know, lots of times when you're looking to drive new volume, to drive sales you talk about new customers, right? Everybody goes, I gotta go find that new customer. That's one of the most difficult things to do is get the new customer. One of the most successful strategies that we've had over the course of the last few years is take that customer you're already doing business with that you already have a successful relationship with and sell them more stuff, you know, whether it's more of the products that you do or find out what other things they need, what other services they need. Focus on that. It is already, you know, to get in that door to develop the relationships is so much of a difficult part of the process and the time consuming element. They already have trusted. They've already believed in you if you've already developed that relationship over time, find other things that you can do for them. The other pieces to take a look at your products and where else can they be sold to or we found. We have, again, some of our products stainless steel things, a lot of the stainless steel metal bending and forming that we do instead of just for residential and commercial environments. We started looking at hospitality and food service and we found that we had products that our customers or new customers different from channels wanted that, to be honest, we never looked that before because we didn't have the need to go looking outside our typical channels. So, those are two suggestions I would made. -Steve, what's next for you and how do you find it? -Our response almost exactly the same as Tim's, develop new products that there might be opportunities for in the market place and then take your product line and offer to people in new markets that you haven't been in before, which for us meant international. So we had to develop some new products for the international market, make metric threads, things of that sort. But that's how we started-- we managed to keep our heads above water. -We've been working with the goal toward the new plant very, very hard in the energy sector which is important to the United States and North America, we think. We're actually the largest maker believe it or not a frac pump blocks in North America, frac pump blocks melted and forged, treated here in Chicago and you heard products we've developed new grades into that that the pump lasts that much longer. We see that as a growth business for us and with the new plant, we can make bigger things instead of a hundred ton, we can go up to 250 to 300 ton. We're not there yet but we're on that path. We've made a lot of blowout preventers this year. Everybody heard about the problem in the Gulf, while in the world you heard the U.K. so we're starting the manufacturing BOPs blowout preventers, the big bodies at the new plant, which is really, really exciting growth strategy. And you heard new products and interesting, you heard Stainless Steel. I've got patents on a vacuum processing but we're starting up within the next literally quarter of VOD, Vacuum, Oxygen, Decarburization. So Finkl, for the first time in its 130 years we did it 70-- 50 years ago at our North side the back out of it just because we didn't have space, didn't have to do it now with our new plant. We're going back into that so we'll be making our first heat of stainless and our growth is in the stainless steel markets and that is entirely against offshore stuff being imported from either Germany, you know, Japan or areas in Europe. So, new products, stainless steel, and then the biggest on top of all of that as we've mentioned earlier is the world markets. We're targeting this new plant, the growth, you know, in China, India, Brazil, got a company people go in to Taiwan. -So size range expansion of your incumbent product, new product and new geographies. -That is correct. We're-- our new plant is five times the size, not a percent, multiple of five, capacity 550 tons, five times, bigger product that nobody in North America can do what we're doing, melt and forge-- nobody. And expanding the grades and what I didn't mention in all of this and our panelist mentioned that, you know, we our technology is the highest in quality in the world so we're at the top end price wise, but we're making the best quality of what we do and that's really due to the people, not the equipment. And it's the schools in Chicago, you know, we've got people from Northwestern work for us. We got people from IIT. We've got about 10 people from the poll that have all gone through internships and we write our own software, we do our own computer system, have our own computer company. All our engineers designed the equipment. We've hired people from University of-- President is U of CMBA, so it's a cross section of the best people with the hardworking people that I think makes us Chicago-competitive. -You know if she got passed the drug test? No, I'm just kidding. That's our rival. While Linda comments on what's next for her company, I'd like to go to the audience for some questions. So I don't know if we have microphones out there or rollers. So, Linda what's next for you and how do you finding it? -Well, we're very excited too about the new plant that we're building. A lot of what we sell goes into what we call personal care I and I and the petroleum industry. So when we look back at 2008-2009 actually happened to be our best year. And we've seen our company grow at least 10 percent every year from that. That's keeping our job here in the city of Chicago, here in the state of Illinois and here in America. And a lot of what we make as he mentioned, for example, one of our customers is Colgate. I was just at the conference two weeks ago where they indicated only 18 percent of what they sell was sold within America. So that means we can be competitive. We can make products and sell them to companies that will be so globally. We just need to be innovative and think how we can do this and make this marketable and keep it, keep these jobs in the city, in the state of Illinois. Process efficiencies you heard that from my colleague here. We're delving at that very heavily right now. How can we improve our processes? We didn't take on any new customers over those years, so that was clearly through process efficiencies. And we took that one step further, not only that we talked to our customers. We ask our customers, would you mind introduce us to other people that could be potential customers. And so for example P&G literally took us and said, "Hey, this is a great company in the city of Chicago." They've been doing good work for us. What can they do for you? And we opened that dialog so we even use those types of avenues to help develop businesses. -So the spirit of town hall-- let me kick it out to the audience, sir please lead us all. -Hi. My name is Pete Keseric with PNC Bank, sixth largest bank in the United States. Thank you very much. I guess my question is for Bruce. Your new plant union or non-union, and why? -Yeah, good question. We're a union company. We've been union for 35 years so it's been, I don't know, 70-80 plus. We have three unions, the machinists, the blacksmiths and the electricians. We worked extremely well together and much like Tim mentioned, one of the drivers, the city and state were absolutely supportive as we went towards a new plant but another advantage was the skilled workforce. We won't lose any of our employees at the new plant on the south side. So we're union. We work well with them and, you know, we're really excited and all these people in the plant that we're hiring. They're all union people. We have the same thing that was mentioned, we have the ruler test, you gotta do math and that in itself is a challenge to